Emergency Exit at the Capital Market Seismograph.
"All input factors just caused a significant increase in the probability of negative turbulence. The dynamics are so strong that the rules of the model require a clear change in the equity quota. The recommendation of the approach is now to be strongly defensive and maximally cautious," reports Oliver Schlick, managing director of Secaro GmbH, who regularly calculates the seismograph and links it to investment recommendations.
As they know, the seismograph combines various economic variables - early economic indicators, interest rate developments or even price fluctuations on the stock markets. From these, the probabilities for three market states in the next month are distilled. Green stands for the expectation of a calm, positive market. Yellow denotes the probability for a turbulent positive market. And red indicates the probability of a turbulent-negative market. If this rises significantly, a massive stock market storm is looming and it's time to get out.
Recently, the red probability had gained the upper hand at a rapid pace. "That's when we had to react. The negative factors for the stock market now seem to be gaining the upper hand," says Schlick.
The bottom line:
With the economic traffic light on red, the private wealth stock market indicator has been positioned defensively since Feb. 28. Specifically, it provides a corridor for the recommended equity allocation between 45 and 75 percent of the individual's intended equity allocation.
Within this range, we are guided by the results of the capital market seismograph. Previously, the seismograph considered an offensive orientation to be appropriate. However, since the seismograph is now on the defensive, the current equity allocation suggested by the private-wealth stock market indicator will be reduced to 45 percent.
Note: Despite careful selection of sources, no liability can be assumed for the accuracy of the content. The information provided in private wealth is for informational purposes and is not an invitation to buy or sell securities.